Estate Planning — An Important Part of Your Financial Life
What is estate planning and why is it so important? According to USA Today, about two-thirds of Americans don’t even have a will,1 which is perhaps the simplest estate plan. Estate planning is also more than just creating a will, as it may involve other important documents like powers of attorney (POAs), advance healthcare directives and trusts. A POA allows you to designate an agent to act on your behalf, should you die or become incapacitated, and is typically used for legal and financial matters. These can be written as “springing” powers, where the agent may only act once you’re no longer able to act competently on your own. Advance healthcare directives, including living wills, empower you to state ahead of time what kind of medical treatment you’d prefer in the event of serious health issues or at the end of life, if you’re unable to speak or decide for yourself. These normally include a healthcare POA, empowering your chosen agent to make related decisions on your behalf. An estate planning attorney will normally include all these documents in your plan. You should also consider the beneficiaries of your various accounts, including contingent beneficiaries.
By having your preferences documented in advance, the estate plan allows you to spell out your wishes, regardless of your financial situation. It’s important for parents of young children to have a plan that names a guardian for their children if both parents die or are incapacitated. If no guardian is named in the will, or if there’s no will, then the court must name one — and it could be someone you wouldn’t necessarily have chosen. You probably know who you’d want to act as your agent if you were incapacitated, or what level of medical intervention you’d desire if, for example, you could no longer breathe on your own. If you hold financial and/or real estate assets, you also likely know who you’d want to take control of those assets after you’re gone. All of these preferences can be expressed in your estate plan.
As well, preparing ahead of time is an act of kindness for your loved ones. Having a roadmap for your wishes takes some of the burden off them while they are grieving. It also removes the necessity for them to make difficult decisions while under considerable duress, because you’ve already made these decisions for them in accordance with your values and wishes.
Once the estate plan is in place, you should review and/or update it at regular intervals. Significant life changes often necessitate a review: marriage or remarriage, divorce, death of a spouse, birth or adoption of a child, etc. At the very least, you’ll likely need to update the beneficiaries on your existing documents, as well as on your financial assets like IRAs, 401(k)s, etc. If you experience a significant wealth event, such as an inheritance or business sale, you may need to update your plan to include trusts that might not previously have been necessary. If you have a trust, you should periodically ensure the appropriate assets are titled in the name of the trust, or you may need to update the trust with additional financial accounts or real estate holdings. Even without the above issues, your estate plan needs to be reviewed periodically. For instance, did you name a guardian when your children were young, but now they’re old enough to be living on their own? You’ll want to update the plan, especially as you might consider naming them as successor trustees or granting them POA.
Good estate planning does require some thought upfront on your part. Who should be your agent? To whom should you grant POA or healthcare POA? What do you want to happen to you and to your assets if you’re incapacitated or die? Once you have your documents in place, however, the hardest work is over. You can enjoy peace of mind knowing your preferences are formally documented and that, by creating a plan, you have reduced much of the decision-making burden for your loved ones.
1 https://www.usatoday.com/story/money/2024/04/03/fewer-americans-writing-a-will/73170465007/
CONTENT DISCLOSURE
This information is for educational purposes and is not intended to provide, and should not be relied upon for, accounting, legal, tax, insurance, or investment advice. This does not constitute an offer to provide any services, nor a solicitation to purchase securities. The contents are not intended to be advice tailored to any particular person or situation. We believe the information provided is accurate and reliable, but do not warrant it as to completeness or accuracy. This information may include opinions or forecasts, including investment strategies and economic and market conditions; however, there is no guarantee that such opinions or forecasts will prove to be correct, and they also may change without notice. We encourage you to speak with a qualified professional regarding your scenario and the then-current applicable laws and rules.
Different types of investments involve degrees of risk, including the loss of principal. The future performance of any investment or wealth management strategy, including those recommended by us, may not be profitable or suitable or prove successful. Past performance is not indicative of future results. One cannot invest directly in an index or benchmark, and those do not reflect the deduction of various fees that would diminish results. Any index or benchmark performance figures are for comparison purposes only, and client account holdings will not directly correspond to any such data.
Advisory services are offered through Corient Private Wealth LLC and its affiliates, each being a registered investment adviser (“RIA”) regulated by the U.S. Securities and Exchange Commission (“SEC”). The advisory services are only offered in jurisdictions where the RIA is appropriately registered. The use of the term “registered” does not imply any particular level of skill or training and does not imply any approval by the SEC. For a complete discussion of the scope of advisory services offered, fees, and other disclosures, please review the RIA’s Disclosure Brochure (Form ADV Part 2A) and Form CRS, available upon request from the RIA and online at https://adviserinfo.sec.gov/. We also encourage you to review the RIA’s Privacy Policy and Code of Ethics, which are available upon request.
Our clients must, in writing, advise us of personal, financial, or investment objective changes and any restrictions desired on our services so that we may re-evaluate any previous recommendations and adjust our advisory services as needed. For current clients, please advise us immediately if you are not receiving monthly account statements from your custodian. We encourage you to compare your custodial statements to any information we provide to you.
